Buying a home is a big decision and will requiring some planning on your part, especially if you are a first time home buyer.

The place you need to start, before you consider where to buy or how many bedrooms is you need to answer the question, how are you going to pay for the home you purchase?

There are several options: Cash, Down payment and Mortgage, or borrow or gift from someone else.

The choice for most people is some form of down payment along with financing the remaining amount with a mortgage. This option requires some planning. First planning on saving a down payment. The conventional mortgage typically requires the buyer to make a down payment of 20% of the purchase price, so $20,000 on a $100,000 home for example.

Note: There are some lending programs that allow for a down payment of less than 20%, such as FHA loans.

In order to figure out how much you need to save, you need to know how much you will be qualified to borrow. This process involves a group of variables, and depends on your current income, amount of down payment and what is your current debt to income ratio. You should start this process well in advance of actually buying a home, even as much as 1 year or more.

It is time now to start exploring finding your first vendor, which is a mortgage lender. There are several different options, including a traditional bank, a mortgage bank, or a mortgage broker.

My suggestion at this point in the process is to start with your bank, if you have a traditional banking relationship. You are only looking for information, and your local bank should be able to provide you with a ball park figure of how much you can qualify for in a house, based upon your income and debt ratios.

If you don’t have a local banking relationship, then you will need to seek out a mortgage professional to help you with this process. The people in this industry, are very willing to help you to start because they hope you develop into a mortgage customer, so don’t be afraid to call multiple people till you find someone you are comfortable with.

This typically is called the “pre-approval process” or obtaining “pre-approval.” It generally is inexpensive to go through the process, they run a credit report, and review your income and debts and give you an indication as to how much you can borrow.

Armed with the information of how much you can borrow, you can now calculate 1. How much do I need to save as a down payment?; 2. How much additional will I need for closing costs and moving expenses?; 3. Do I need to pay down debts in order to qualify? and if so by how much?; 4. What type of home will this amount purchase, based on where I want to live?

By starting this process early and having a definitive plan in place for paying for the house, you become a much more attractive potential buyer in the market place. This will pay dividends later in the process.

David A. Freeburg, is an attorney licensed in the State of Ohio and is a Certified Specialist in Residential Real Property by the Ohio State Bar Association. Licensed Title Agent and Member of Specialist Title Agency, LLC. To reach David directly, email david@freeburglaw.com